FCC set to take up incentive auction, spectrum holding proposals

The Federal Communications Commission on Friday is expected to release the tentative agenda for its September meeting, which will include two key wireless-industry items. One deals with how much spectrum wireless carriers can hold in each market, and the other proposes rules for enticing broadcasters to give up their spectrum for auction to wireless companies.

Among the most highly anticipated items on the agenda for the FCC's Sept. 28 meeting will be the agency's proposed rulemaking on how to structure the "incentive auctions" authorized by Congress as part of a payroll tax cut package passed in February. The proposal is aimed at freeing up more spectrum to meet the nation's growing demand for wireless broadband. Wireless carriers argue that they are running out of spectrum needed to fuel the plethora of wireless gadgets Americans are using, from smartphones to tablets.

The FCC is aiming to finalize the order by mid-2013 and hold its first auctions in 2014.

"In freeing up spectrum for wireless broadband, incentive auctions will drive faster speeds, greater capacity, and ubiquitous mobile coverage," FCC Chairman Julius Genachowski said in a statement. "These are essential ingredients for innovation and leadership in the 21st century economy where smartphones and tablets powered by 4G LTE and Wi-Fi networks are proliferating, and the mobile Internet becomes more important every day. Over the last few years, the U.S. has regained global leadership in mobile innovation -- and we must not let up now."

The FCC will be seeking comment on how to design the incentive auctions, which are aimed at persuading TV stations to give up their spectrum, share spectrum with another station, or volunteer to give up their higher-quality UHF spectrum in exchange for a VHF channel (which doesn't reach as many viewers). The spectrum legislation called on the FCC to conduct two kinds of auctions: a reverse auction aimed at seeing how many TV stations are willing to participate in the incentive auctions and a forward auction for wireless carriers that want to buy that spectrum.

The FCC is proposing several ideas for designing the auctions. They include a "descending clock" auction, which would see how many stations might be willing to give up their spectrum at one price, an FCC official said Thursday. If more stations are willing to participate than are needed to meet demand in a particular market, the price would fall over time until the number of participating stations reaches the necessary level.

Another possible plan would be to conduct both the reverse and forward auctions at about the same time, which might involve trying to match stations willing to participate with wireless firms that need spectrum in the markets where those broadcasters operate.

An issue that the FCC will be seeking input on is whether the commission should establish a "reserve price" for the reverse auctions that would set the maximum amount broadcasters could seek for giving up their spectrum.

Wireless carriers, along with technology companies that build products and services that run on those wireless networks, lobbied Congress for two years to pass incentive-auction legislation. CTIA, the wireless-industry trade group, said it was "pleased" the FCC was beginning the process of implementing the incentive-auction legislation.

"We appreciate that the commission will take a thoughtful, thorough, and efficient approach in this proceeding so the unused and underutilized spectrum is reallocated to its highest and best use in an accelerated timeframe," said Steve Largent, CTIA president and CEO, in a statement. "The FCC is taking a vital step that will foster continued growth in the U.S. while encouraging wireless innovation that will have a significant impact on many additional sectors of our economy, including education, health care, transportation, and energy."

Broadcasters have said they are open to the incentive auctions but want the FCC to build safeguards into the process to ensure stations that do not participate are not harmed. The FCC official said the proposed rules will provide more information on the protections for broadcasters but declined to outline the details.

A related proposed rulemaking the FCC also will be taking up at the September meeting could affect which wireless companies participate in the incentive auctions. The FCC is seeking comment on the rules related to how much spectrum each wireless company can hold in a market.

The proposed rulemaking will ask the public whether the commission should retain the case-by-case approach it currently uses when evaluating spectrum transactions or if it should move to a more standardized approach. The FCC also will seek input on whether the commission should consider the quality and type of spectrum a carrier has when evaluating its spectrum holdings.

The FCC's current "spectrum screen" process has drawn criticism from a wide range of wireless companies -- from the biggest providers such as AT&T to smaller rivals such as Sprint.

"The current spectrum screen fails to distinguish between the utility of different spectrum bands for wireless broadband communications," Sprint spokesman John Taylor said. "We are pleased that the commission plans to consider improvements to its spectrum aggregation regulations and we look forward to participating in these discussions."

An FCC official said the commission wants to complete action on the spectrum-screen issue before it finalizes the incentive-auction rules.